SMEs will continue to be the cash cow for resellers this year, according to Forrester's latest research on European IT budgets.

In its 2005 IT Spending Plans: European SMEs and IT Spending: European Enterprises reports, the research firm claimed that SME IT budgets will increase by 3.3 per cent on last year, and enterprises' budgets will increase by 2.9 per cent.

The report said that SMEs will spend almost half their budget on IT headcount and hardware, whereas the enterprise market was more "cautious", with spending on only a limited number of technologies.

"On the enterprise side, we weren't surprised. It has been a cautious year for them, which reflects the economies of their countries.

"Enterprises are generally more exposed to market forces," said Manuel - ngel Mendez, an analyst at Forrester.

"For the SME, the complexity of business process is increasing, and they are more driven by internal factors."

The report also stated, reassuringly, that SMEs will continue to buy through resellers this year instead of direct from vendors.

"Resellers really cater to most of the SME market, as SMEs become more reliant on them," Mendez added. "The likes of Dell and Oracle are trying to get their resellers up to speed to target the SME sector and to get into those extra profit pockets."

In the SME space, the public sector had the most positive outlook, while half of transportation and logistics SMEs admitted that 2005 will be a challenging year for them, with only 18 per cent expecting to upgrade or replace desktop computers.

But Peter Scargill, national IT chairman at the Federation of Small Business, said the figures were disappointing. "If you take interest rates into account then the SME figure is quite flat. I'm disappointed SMEs aren't spending more, but at least they aren't spending less," he said.

james_sherwood@vnu.co.uk